[lbo-talk] revisiting the FROP and the Brenner hypothesis

Philip Pilkington pilkingtonphil at gmail.com
Sat Apr 11 18:48:41 PDT 2009


On Sun, Apr 12, 2009 at 2:42 AM, Philip Pilkington <pilkingtonphil at gmail.com
> wrote:


>
>
>>
>> By 'zombie capital' I'm referring specifically to the physical plant
>> Brenner claims remains in use for years despite being unprofitable
>> relative to new physical plant, or relative to physical plant newly
>> located in lower-wage-cost areas. So it doesn't do its own
>> re-investing. Rather, Brenner's argument is that so long as revenue at
>> least covers the user cost, its owners will keep it running even if
>> it's at below-average profitability because the purchase cost is
>> already 'sunk'. The counter-argument is that while this is certainly
>> true for a while, Brenner greatly overestimates depreciation time.
>> Hence 'zombie capital', or undead plant.
>>
>
>
And, about depreciation time:

If we consider that both technological innovation AND lower-wages are growing at an increasing rate - due to technology/globalisation. Then... no. Depreciation time INCREASES as time goes on..... To measure it might be difficult... but theoretically... well... I'll only say this to give a hint:

I hope every economist knows the difference between simple and compound interest... because the latter builds extremely quickly!



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